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What I Learned and How Can I Apply It in My Life?

Negotiable instruments are transferable signed documents that promise to pay money to the bearer or holder. An agent can sign on behalf of a principal if they are authorized to do so in writing or orally. The agent will be personally liable if they sign without authorization or fail to disclose the principal. Indorsement refers to signatures on the instrument and means assigning it. A minor or corporation cannot be held liable as an indorser but can still transfer rights to the instrument. An accommodation party lends their name without consideration to help another party, and is liable to a holder for value. The laws on negotiable instruments protect the rights of all parties through liabilities and transfers of the instrument.

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Abby Gail Tiongson
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65 views2 pages

What I Learned and How Can I Apply It in My Life?

Negotiable instruments are transferable signed documents that promise to pay money to the bearer or holder. An agent can sign on behalf of a principal if they are authorized to do so in writing or orally. The agent will be personally liable if they sign without authorization or fail to disclose the principal. Indorsement refers to signatures on the instrument and means assigning it. A minor or corporation cannot be held liable as an indorser but can still transfer rights to the instrument. An accommodation party lends their name without consideration to help another party, and is liable to a holder for value. The laws on negotiable instruments protect the rights of all parties through liabilities and transfers of the instrument.

Uploaded by

Abby Gail Tiongson
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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RELEBUS – Negotiable Instruments (Part 2)

Submitted by Abby Gail A. Tiongson AC181

What I learned and how can I apply it in my life?

Negotiable instruments are transferable signed documents which promises to pay the
bearer/holder the sum of money when demanded or at any time in the future. An agent can sign a
negotiable instrument on behalf of the principal. Keeping in mind the laws on agency, an agent of a
negotiable instrument can’t sign on behalf of a principal if they are not authorized to do so. Agency may
be created written or oral unless require otherwise like in the statute of frauds. Statute of frauds refer
to the requirement that a contract must be in written form, signed by the liable party, and sufficient
content to evidence the contract.

An agent can’t be liable to the negotiable instrument if he is duly authorized, indicated that he is
signing as an agent and disclosed the principal whom he is signing for. All of these must be present,
otherwise the agent will be personally liable for the negotiable instrument. The principal is liable only if
agent according to his limited authority.

I also came across the law on indorsement. Indorsement refers to the signatures of parties seen
on the negotiable instrument. It simply means assignment of the instrument. If a minor or corporation
became an indorser of an instrument, they will not be held liable in accordance with law. However, if
they are guilty of fraud like a minor stating that he is of legal age to accept an indorsement, they are
liable to the person whom the indorsed the instrument to. On the other hand, the indorsee of a minor
or corporation can still acquire the title or be the holder of the instrument and then enforce it against
the maker, acceptor or other parties before the minor. If the negotiable instrument was incomplete or
undelivered, the indorsee of a minor can’t enforce against any parties before the minor as the
instruments is not valid.

If for example a person obtains an instrument by forging or signing without any form of
permission from the recent holder of the instrument, then the act is wholly inoperative. This means that
any right attached to the bearer od the instrument will not transfer to the party who committed forgery.
However, if for some reason, he managed to deceive a party of his forged instrument, the deceived
party can only enforce payment to those signatures that are genuine. But they can sue the person guilty
of forgery to make amends as a remedy.

I also came across the term accommodation party which is the person who signed an instrument
without receiving any value therefore and for the purpose of lending his name to another person. He
can be a maker, drawer, indorser or acceptor. The accommodation party is liable to the holder of value
of an instrument. I like to remember that an accommodation party is like the “call a friend” party when
a party is short in cash. Without any consideration received, an accommodation party will pay to a
holder in value in behalf of the accommodated party and recover this payment to the party
accommodated as well. A holder of value is a holder to whom an instrument is issued or transferred in
exchange for something of value this includes pre-existing debt.

Last but not least, a holder of a bearer instrument can strike out previous indorsement
immediately following a blank indorsement or a special instrument. However if one is a holder of an
order instrument, the holder should check it its covering a special indorsement as he must look for his
title through all the previous indorsements.
RELEBUS – Negotiable Instruments (Part 2)
Submitted by Abby Gail A. Tiongson AC181

In conclusion, the laws on negotiable instrument, highlighting the topic indorsement is very
important to protect every signed partied affixed in the negotiable instrument. Knowing its different
kinds and nature will let you know who is really liable and to whom are they liable.

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